Question

Bruce Corporation makes four products in a single facility. These products have the following unit product costs:

	Products
	A		B		C		D
Direct materials	$	15.00	$	10.90	$	11.70	$	11.30
Direct labor		20.10		28.10		34.30		41.10
Variable manufacturing overhead		5.00		3.40		3.30		3.90
Fixed manufacturing overhead		27.20		35.50		27.30		37.90
Unit product cost	$	67.30	$	77.90	$	76.60	$	94.20

Additional data concerning these products are listed below.

	Products
	A		B		C		D
Grinding minutes per unit		4.50		6.00		5.00		4.10
Selling price per unit	$	76.80	$	94.20	$	88.10	$	104.90
Variable selling cost per unit	$	2.90	$	1.90	$	4.00	$	2.30
Monthly demand in units		4,700		4,700		3,700		2,700

The grinding machines are potentially the constraint in the production facility. A total of 78,100 minutes are available per month on these machines.

Direct labor is a variable cost in this company.

Up to how much should the company be willing to pay for one additional minute of grinding machine time if the company has made the best use of the existing grinding machine capacity? (Round your intermediate calculations to 2 decimal places.)

Answer 1

			A	B	C	D
Selling price per unit			76.8	94.2	88.1	104.9
less:Variable expense
Direct materials			15	10.9	11.7	11.3
direct labor			20.1	28.1	34.3	41.1
variable manufacturing overhead			5	3.4	3.3	3.9
variable selling cost per unit			2.9	1.9	4	2.3
total variable cost per unit			43	44.3	53.3	58.6
contribution margin per unit			33.8	49.9	34.8	46.3
grinding minutes per unit			4.5	6	5	4.1
contribution margin per min			7.511111	8.316667	6.96	11.29268
Ranking			3	2	4	1
will be willing to pay			$6.96	answer